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posted: 8/13/2011 7:00 AM

Honda wants to build fuel-efficient car factory in Mexico

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Honda Motor Co., Japan's third- largest automaker, plans to build an $800 million factory in Mexico to supply fuel-efficient cars to Mexico, the U.S. and Canada.

The plant will have capacity to produce 200,000 subcompact vehicles a year and is scheduled to begin operations in 2014, Honda said in a statement. At full capacity, the factory will employ 3,200 workers, the Tokyo-based company said.

"With growing demand for fuel-efficient vehicles, this plant will increase Honda's ability to meet customer needs for subcompact vehicles from within North America," Tetsuo Iwamura, chief operating officer for Honda's North America region, said in the statement.

Mexico's lower wages, proximity to the U.S. and free-trade agreements with more than 30 countries have spurred Volkswagen AG, Nissan Motor Co., Mazda Motor Co. and General Motors Co. to announce investments in the country of more than $400 million each in the last year.

The factory will be located near Celaya, Guanajuato, in central Mexico, which is about 210 miles east of its existing Mexico auto plant in El Salto, Jalisco, Honda said. The new plant in Mexico will be Honda's eighth plant in North America and increase production in the region to 1.83 million units in 2014.

In June, Mazda announced it will build its first auto factory in Mexico with partner Sumitomo Corp. That plant will have capacity of 140,000 vehicles and begin operations in fiscal 2013.